An Appraisal of the Dividend Policy of Batbc

Chapter. 1 Introduction

1.1 Introduction:

The report comprises the dividend policy analysis of British American Tobacco Bangladesh Co. Ltd. (BATBC). Dividend decision can significantly affect a firm's external financing requirements. Whether dividend should be paid, and if so, in what amount, are important decisions that depend primarily on the firm's dividend policy. The optimal dividend policy is the one that maximizes the company's stock price which leads to maximization of shareholders' wealth and thereby ensures more rapid economic growth. Shareholders like cash dividends, but they also like the growth in EPS that results from ploughing earning back into the business. We have chosen BATBC for our analysis because on the basis of growth, profitability and quality of management, BATBC is a very attractive company. BATBC currently holds 75% of the market share in value because of its leadership in the premium segments.

The report is well beset with last five years dividend policy analysis and financial patterns. It embarks upon relevant financial ratios those are useful indicators of a firm's performance and financial situation altogether. The fact minutely reflects through the report that financial ratios can be used to analyze trends. The repot then ambles along with the analysis of whether BATBC follow dividend irrelevance theory or bird-in-hand theory. It also helped to understand whether their dividend policy has affected the stock value or not.

BATBC offers only cash dividend. It doesn't offer any stock dividend. The dividend payout ratio analysis of the company remains a core part of the term paper. The analyses have reflected minutely all the trends with due graphical illustrations that offer a good inspection of the firm's current financial position and dividend policy.

1.2 Origin of the Report:

Dr. Tanbir Ahmed Chowdhury, Chairperson of Department of Business Administration, East West University and instructor of Corporate Finance (FIN-507) made us undertake the responsibility of preparing a report on "An Appraisal of the Dividend Policy of British American Tobacco Bangladesh Company Limited (BATBC)" by assigning it during the continuation of this semester (Spring- 2014). This report is required as a part of fulfilling the objective of Corporate Finance (FIN-507). We have given our best effort to appropriately apply our potentiality and theoretical knowledge to make the report reliable and information worthy. Hopefully our sincere effort will be regarded as successful if this dissertation fulfills the objective of the course.

* Area of Research: The main objective of the study is to get an idea about the dividend policy scenario of BATBC. It will specify the reasons for undertaking dividend decisions.

* Time of Data: The information is collected from various sources. The research data is collected from 5 years annual reports of British American Tobacco Bangladesh. (2007-2012).

1.3 Objective of the Study:

 The present analysis is intended to study the over-all dividend policy of BATBC.

 To analyze which theory BATBC follow.

 To analyze the relationship between BATBC's dividend policy and its market values.

 To analyze whether the dividend policy of BATBC is consistent with the company's wealth maximizing goal or not.

1.4 Scope of the Study:

This study will concentrate mainly on the overall dividend policy of BATBC. In addition, it will examine the financial performance of the company with the help of trend line. However this study will compare the market value of the firm since we need another company for the comparison.

1.5 Methodology of the Study:

This study uses a secondary data collection method to appraise the dividend policy of British American Tobacco Bangladesh Company Limited (BATBC). The assignment was primarily prepared by making some analytical approach. Due to some constrains, survey research method was not possible to conduct also we frequently performed group discussion to gather more information. We also used the annual report and company's website. For the fulfillment of our report's purpose, we had selected BATB's six year (2007-2012) annual reports. The existing guidelines, documents and other supporting papers relevant to this assignment were also consulted and examined.

1.6 Limitations of the Study:

To make a report various aspects and experience are needed. But we faced some barriers for making a complete and perfect report. These barriers or limitations, which hinder our work, are as follows:

* Difficulty in accessing data of its internal operations.

* Non-Availability of some preceding and latest data.

* Some information was withheld to retain the confidentiality of the organization.

* The time span was not sufficient enough to learn all the activities of the organization properly.

* Lack of co-operation from the data source.

Chapter.2 An Overview of British American Tobacco Bangladesh Company (BATBC)

British American Tobacco Bangladesh Company (BATBC) Limited is a subsidiary of British American Tobacco, based in London, UK. Bangladesh is one of the 68 countries in which BAT has manufacturing plants. It is one of the oldest and largest multinational companies operating in Bangladesh. BATB started its journey as Imperial Tobacco Company limited in the then undivided India in 1910. Beginning the journey as Imperial Tobacco 100 years ago, the company set up its first depot at Armanitola in Dhaka. After the partition of India in 1947, Pakistan Tobacco Company was established in 1949. After independence in 1971, Bangladesh Tobacco Company Limited (BTC) was incorporated as a private limited company. In 1998, the company changed its name and identity to British American Tobacco Bangladesh aligning the corporate identity with other operating companies in the British American Tobacco Group.

BATBC has one of the most efficient marketing and distribution network in the country. It is quick to identify market trends and equally adept at responding to such trends. In response to threats of losing market share to low-value competitors, it has introduced various